Apparently he was serious. Lee is trying to find his prime contractor for the canal project.
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This entry was written by Dram_man, posted on January 2, 2008 at 6:43 am, filed under Asides, Korean Economy, South Korea. Bookmark the permalink. Follow any comments here with the RSS feed for this post.
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39 Comments
This will not help the man or the country . . .
Interesting use of words. The heads OF 5 major firms, not the heads of THE 5 majors firms. Makes you wonder if he stacked the deck in favor of a certain company, making sure it would get the lion’s share of the contracts. Shouldn’t he be asking for submissions instead?
I’m sure this will be as successful as the Great Leap Forward was…
As long as it will be done with private funding, I don’t see a problem.
This project will go forward on a “market principles” basis, leavened of course with a whole bunch of state guarantees for the providers of the “private” funding. If (when) the market won’t support the project by actual revenues earned from operations, taxpayers will make up the difference for the operator. Why not? Korea’s treasury is already doling out hundreds of millions of dollars annually in guarantees to private owners of public-directed infrastructure.
What this does is transfer the profits to the private owner/operator, but the possibility of losses is borne by the taxpayer. In other words, the returns are guaranteed, like the purchase of a variable-rate bond with a minimum return and no possibility of default. All upside, no downside — who wouldn’t “invest” in this way?
I’m not against this, as provision of guaranteed returns is the only way to entice private money to make government policy-directed investments, especially ones where the logic is not immediately apparent. But it’s quite dishonest for governments to describe such financing as “private” financing as if there were no burden to the taxpayer.
The canal could in fact be a master stroke for the delivery of commodities from the Seoul area to Pusan. As long as shipment is not time-sensitive, riverine transport can be much less expensive than rail (of course, in most places the river actually exists, while Korea proposes to build one across the country’s mountainous spine). As construction of new cross-country rail seems impossible, Lee Myung-bak may be on to the only sensible method to expand Korea’s transport capacity.
Or, he’s signaling his attraction to stupid Japanese-style government “stimulus” “creating jobs” by pouring concrete over everything.
William,
You see “The Great Leap Forward.” I see “Seward’s Folly.”
The man was the mayor of Seoul, after all. I also presume he knows a thing or two about business.
Last time I drove from Seoul to Pusan there seemed to be quite a lot of mountains. In fact there were so many mountains and valleys that the cut of the road through them was actually a quite impressive feat of civil engineering.
How are they gonna get water through there? Is this going to be a mostly underground tunnel canal?
I am reminded, wasn’t the Kumgang Tour supposed to be handled by “market forces” before it went bust and was taken over by the government?
The Kumgang tour is making money, I believe. My brother-in-law works up there and sees no shortage of tourists.
Someguy> According the Maeil Kyongjae the five firms are Daewoo, Samsung, GS, Hyundai, and Daelim. All pretty heavy hitters, however I would not like to set odds on the chances of any one in particular being selected.
Don’t know about Kumgang but that sounds about right. Certainly the investors in Kaesong enjoy certain guarantees besides access to a Korean-speaking workforce happy to get $4.00/month and a bowl full of rice every day.
Anyway, one should be profoundly suspicious anytime a Korean government official makes noises about “market principles” (or, for that matter, “law and principle”) because these are concepts the officialdom does not actually understand.
Wow, that’s some innocent analysis. “My restaurant is full of students and retirees enjoying free refills on the soda fountain. I must be making money.”
Being fully-booked doesn’t mean it makes money! The DPRK demands a tribute per head on the tour. If the cost of the tour, including the per-capita tribute, exceeds the price for which it can be sold (remember, tour buses must be purchased and gassed), the tour loses money. You’re not going to make it up on volume.
As another example, from 2000 to 2005 I worked in a law office whose promising start turned to shit after the other partners started adopting your style of economic analysis. We had a running cost of about W75,000 per hour, per person. Why, given that the cost of doing business was as plain as day, they wanted to sell legal services for W10,000 per hour is beyond me.
But it Hurt Their Pride™ to work for obstreperous, demanding foreign clients at W200,000-350,000 per hour, when they could work for (also obstreperous and demanding) Koreans for W10,000. It only worked so long as the profitable work found us too, but the avalanche of money-losing, low-level
scutlegal work squeezed out our ability to do or attract good-paying work. And so the Pure Korean™ work metastasized and gobbled up the company along with three years of retained profits earned before Pride took over.Our associates worked from 9:00 a.m. to midnight, every day, and we lost more money than ever.
How I wish that Korean colleges taught economics.
#5, “If (when) the market won’t support the project by actual revenues earned from operations, taxpayers will make up the difference for the operator. ”
An assumption based on actions by the past left-wing governments may not apply to the new government.
Just on enviornmental/ecological grounds alone, this would be the worst mistake ever attempted in the ROK, drawfing even the Saemangeum disaster — and this is obvious to the most casual observer, including many here.
No, just because the man was Seoul’s Mayor and Hyundai’s construction boss, one cannot presume he has any common sense in being able to perceive that a given gigantic redo-the-landscape project might NOT be a good idea. One might also have thought back in 2002/3 that with all their high intellegence and deep experience, “Cheney & Rumsfeld must know what they’re doing”, and one was horrifyingly wrong. Lee MB has never had supreme power before — from the outset, with this news, we’re getting omminous “Caligula” vibes…
#12 is quite correct — altho the Geumgang-san Tours have been moderately popular, the project has always been a steady money-loser due to NK’s charges and the high investment costs (the hot-springs facility was US$30,000,000 by itself, we were told in Jan 2002).
And he’s planning to complete the canal by 2012.
http://imnews.imbc.com/replay/....._2710.html
Looking back at history, the last time the Korean government tried a major civil engineering project in the form of the Korean High-Speed Railway, the said government announced back in 1992 that it will be completed by 1996. Of course the project ran into trouble, Bechtel had to be brought in to set things straight and the Seoul - Taegu part(the Taegu -Pusan part is still under construction) was completed in time for KTX’s inauguration on 2004, eight years behind schedule. And if I remember correctly, at the time of the KTX inauguration the project was reported to be 60% over budget.
Now will history repeat itself with the “Grand Canal”? Well, only time will tell.
Exactly.
There are some Koreans who are wondering whether this project will bring economic mess to the country like the one that the last Protestant president brought on at the end of his term.
People are already bashing Lee before the man has taken office. So he’s talking to these companies about this project. That doesn’t mean it’s going to happen or that it’s even viable.
This is just like the thread on Eldon. You remember—the old white guy who works in Dubai. Lee appoints a Westerner and people say he’s supporting tokenism and not building bridges to the opposition, yet if Lee had appointed someone from the opposition, those same people would be complaining that he’s not adopting international standards of transparency and competition.
I see Lee’s vision as an ambitious one. I hope he can make it work.
#5,
I had never heard of Uljin Airport, and I’ve been to more places in Korea than most Koreans. I could never understand how they could get away with building so many airports here. You would think that the tax payers would have raised a fuss considering that all domestic destinations are no more than a 5 or 6 hour ride on the train.
Ambitious but wrong is not helpful.
LMB is no doubt inspired in part by Lt. Okamoto’s visionary development efforts, and his own experiences ramming through developments like the Cheonggyecheon “stream restoration” (only in Korea would a concrete trough artificially pumping river water through the heart of the city be a “lifestyle improvement”), the lifeless “City Hall Plaza” and bus-only traffic lanes.
Park Chung Hee’s Seoul-Pusan highway project looked wasteful — positively daft, in fact — at the time. And he created POSCO in response to the inability of Korea’s private sector to get a steel industry going. In the 1960s there wasn’t a heck of a lot of demand for a four-lane paved road between Seoul and Pusan. However, that vision laid the foundation for the prosperity Koreans enjoy today.
But that was a different era. What worked then will not work now. LMB is planning to expand transport capacity between Seoul and Pusan because he’s still wedded to the idea of a metal-bashing Korean economy — he thinks more manufactured goods will need to move to the southern port in the future. Me, I think Korean manufacturing is near death, and we should be planning a post-industrial economy.
To the naysayers, the canal embodies 1960s development-state thinking at a time when Korea needs its government to see what’s coming over the horizon in 2010 and beyond (hell, what’s happening right now) and adjust national policies accordingly. That’s what worries people. There are heartening signs like LMB musing about the abolition of the Ministry of Edumacation (which will never happen) and reducing the bureaucracy in general, which is why I am not one of the naysayers yet.
I quite agree with Barrister Carr there — Korea’s current greatest socio-economic problems these days have little to do with lack of gigantic architecture — issue #1 (and probably all 1-10) is Education, supremely important and entirely dysfunctional — now that North Korea is little more than a toothless headache, any national leader focusing on much of anything else besides fixing the Education troubles (radically and ASAP) is wasting everyone’s time.
I cannot agree on one example-aside though, the one about the Cheonggyecheon project, because i rather like the results. To wit:
>(only in Korea would a concrete trough artificially
> pumping river water through the heart of the city
> be a “lifestyle improvement”)
Not at all true — there are a thousand big cities worldwide whose centers would be greatly improved if a clone of the Cheonggyecheon project were to be installed in it. Not NY or SF or any of the Euro-greats of course, but there are many blighted others…
“Not NY or SF or any of the Euro-greats of course, but there are many blighted others…”
As long as they keep the water pumping, eh?
In the 19th century, Europeans expatriates tried to recreate the canals of their home countries in their Asian and European colonies. Little did they know that in the hot and humid weather these canals would develop a festering stench and become the habitat of disease carrying mosquitoes.
Park was heavily criticized at the time for the Seoul-Pusan highway and POSCO steel projects (the World Bank wouldn’t fund POSCO, I recall), but the main objection was that the Korean economy hadn’t developed enough to yield sufficient return on these investments, and Korea’s fast growing economy proved those criticisms incorrect. The canal project, though, just simply doesn’t make any economic sense. Canals are primarily used to ship cheap, bulk material that is, as Brendon mentioned, not time sensitive, such as coal, grain, petroleum, and chemicals. The proposed Korean canal would only be good for shipping those products from Seoul to Pusan, and vice versa. But, in the Korean case, most shipped grain, petroleum, and coal is imported, and thus would come into a major sea port, so the canal wouldn’t do any good. Korea is also a major exporter of chemical products, so a canal probably wouldn’t be of much use here either. And S Korea is only the size of Indiana. It’s not like the US, where distance makes domestic transportation expensive. Not only that, S. Korea is surrounded by ocean on three sides. So, a canal would only be useful for transportation back and forth from East to West. And, as others have mentioned, 80% of the land area is covered by mountains and hills. So, a canal would be a very expensive proposition. If the government wants to lay down infrastructure to develop some type of industry of the future, I’m all for it- even something wacky like nanotubes and space elevators would make more sense. The canal plan looks like major pork provision to me - to the construction industry, and to constituents along the canal route.
Boy that was fast
Lee Scraps 7% Target for 2008
http://www.koreatimes.co.kr/ww.....16609.html
And there are severe opposition to the canal building up. That’s not written on stone either.
Today I spoke to someone that worked for LMB at Hyundai and was told the guy would get set grand schemes in motion and when they went awry, they would cover it up and basically throw the money away. Considering the conversation, this canal fixation does not bode well for the future.
Additionally, their decision to buy enough KTX locomotives and cars to handle 100% of their projected high-volume (holiday) traffic, rather than to purchase in quantity based on excess of their projected normal volume, insured that they’ll be running at a loss for some time.
For all you naysayers who cloud the sky with tales of economic doom!
You have forgotten that Korea is backed by the IMF. They will never let a country fail now would they?
You guys talk like the canal is stretching all the way from Seoul to Busan. In actuality, it is linking the southern tip of the Han River with the northern tip of the Naktong, which is 20 km. Which means, only a small fraction of this “canal” is man-made.
As for profitability, no matter how expensive the project may turn out to be, as long as Korea is a nation which depends heavily on shipbuilding and maritime logistics, which it is, given enough time, the canal will turn a profit.
It may be that the connecting segment will only require 20 kim of construction, but I am reasonably certain the remaining length of naturally existing waterway will require a great deal of construction work to enable it to ship cargo on a major scale. I would not be surprised if the completion of this project would require the building of and/or removing of some dams, construction of resevoirs, construction of locks, and possible flooding of some areas.
Why does a small country surrounded by sea, with plenty of excellent international port facilities (Busan, Incheon, Gunsan, etc) and a very capable domestic rail cargo and trucking infrastructure need this? Does Korea really need more environmental degradation, especially when the project makes little or no sense?
Don’t forget the dredging necessary to make these rivers navigable their entire lengths. The depth of the river needs to be enough to accommodate the draft of a loaded barge. Mississippi River barges commonly have a draft of 3m or more.
By contrast, the Mighty Han River running through Seoul has an average depth of 2.5m.
Here we’re talking about connecting the “tips” of these rivers — their headwaters — where they are at their shallowest. You might think the work is concentrated in that small region (20km through the mountains is still a lot of civil engineering!), but in order to accommodate barge traffic a lot of riverbottom needs to be scraped up all along the length of both rivers, to make sure the river still runs out to sea.
Well, just took a look at google earth, and while it is kind of cool how the headwaters of the Nakdong and Han come within 20 km of each other, from Chungju to Yecheon, the land in between is, not surprisingly, all mountains - so I guess they’d either try to build some kind of underground canal, or just blast the mountain away. As for the shipbuilding industry as some sort of justification for this project - consider that the ships on this canal are likely to be tug boats and narrow barges - of very little interest to major Korean shipbuilders, who are already big players in the much more profitable open ocean container ship industry. Hard to see how they’d have any interest in barges. Sure, they could link the rivers at great cost for minimal gain, but why? A national referendum is a great idea, I hope those civic groups get what they’re asking for. And, for LMB’s spokesman to compare civic group opposition of the canal to criticism of the Chonggechon project is just silly - a glorified water fountain has nothing in common with a real canal, that must handle ship traffic and go through mountains. Maybe LMB should build a national bicycle trail instead, that I’d support.
#29 & #30 & #31: quite so!
A national bicycle trail would be SO much better, and useful…
That national bike trail is a great idea, and it would be only a ferry ride away from more cycling opportunities in Japan.
Bike Path???
Let’s not give them any ideas. Just think of the slogans that would engender amount the governent brain trust:
“Towards the 21C ubiquitous national cycling culture society”
I would rather live with the canal than put up with that fate!
How about the “Korean Coastal Cycling Trail”? Chonggechon helped improve quality of life in Seoul because it provided a nice place to walk. What Korea needs is more opportunities to go outside and get some exercise. The Han river should be used for sailing and recreation, not barge traffic. A national bike trail, with a network of parks would be pretty cool.
I agree that implementing this canal will require a lot of expense and extraordinary civil engineering.
But I also think that Korea is a nation that cannot have too much transport infrastructure.
The reason why I am for the canal is based on a personal idea that I’ve always had, here in the US, that it would be excellent if there was an alternative that allowed radically reducing the number of 18-wheeler tractor-trailers on the highways.
If the canal can reduce the number of such trucks shuttling along the inter-province highways in Korea, that alone would be a very good thing that can lead to a number of unforeseen benefits. A single barge can probably transport enough goods that would otherwise require 5, 10, or 20 trucks. It would be cheaper. It also reduces traffic congestion on the highways. Less accidents. It’s also cleaner; a barge produces less pollution than 5, 10, or 20 trucks. Cleaner also means reduced fuel consumption.
Also, big heavy trucks tend to do more wear and tear on the highways. Less big trucks on the road means less highway maintenance.
Some have mentioned why the need for the canal if there already exists excellent terminals in the major port cities and Korea is surrounded on three sides by ocean. But you’re conflating different segments of the shipping industry. International cargo is different from domestic cargo. If someone needs to ship I-beams, or several coiled steel, or lumber, they’re more likely to put that on a truck rather than a container ship.
Lastly, most of the objections raised here focused purely on the short-term, temporary difficulties. But the benefits of the canal last indefinitely.
Yes, canal transportation is cheaper and more eco-friendly, especially if mules are pulling the barges. But, consider the downside - time - they’re slow. So, you only use them to ship cheap, heavy, stuff, that can take a long time to get to its destination, such as, grain, chemicals, coal, oil. Your I beams probably need to get to the construction site on a tight schedule, and thus wouldn’t make it on the barge. Relatively speaking, the cost of moving oil from Pusan to Taegu (50 miles) is pretty insignificant compared to the cost of moving it several thousand miles from Kuwait to Pusan. In the US, that’s not true, it’s over a thousand miles from New Orleans to Minneapolis. So, while there might be savings, in the big picture, they’re not that great.
In addition, we should consider the effect on property values of running industrial barge traffic on major rivers in urban areas. Han River waterfront property is at a premium, because of the scenic view of the river. Putting lots of pollution making barges full of coal and chemicals, etc, would be an eyesoar, and have the opposite effect of chongechon, which raised property values by removing lots of traffic.
“the cost of moving oil from Pusan to Taegu is pretty insignificant compared to the cost of moving it from Kuwait to Pusan.”
You’d think, wouldn’t you? I started up a little side venture last year importing flax seed (key word: Omega-3)from Saskatchewan. Looking at everything I pay for logistics, about two thirds is spent getting it to Pusan, one third is spent getting it to Seoul. Don’t know about oil.
As for riverfront beauty, 2MB is from that generation where the sight of barges, cranes, busy ports and smokestacks is beauty itself. There’s a whole generation of General Park nostalgists who agree with him.
Linkd - that’s surprising, I didn’t expect that. Why wouldn’t they ship to Incheon, and then to Seoul, rather than through Pusan? Maybe they should focus instead on improving port infrastructure and transportation between Incheon and Seoul.